Arkansas is going to receive $4 billion-plus from the Biden American Rescue plan — $1.7 billion for the state; $1 billion for local governments; $1.2 billion for schools, and billions more in direct payments to individuals, child tax credits in the form of cash and added unemployment benefits for nearly 3 million Arkansans.
The individual payments could run the benefits over $7 billion in Arkansas, a state with a $6 billion general revenue budget.
Governor Asa Hutchinson says it’s too much money. Arkansas Republicans in Congress say we can’t afford it. I’ve heard none volunteer to give the money back (I’m channeling here the line Republicans always throw at liberals who complain about tax cuts that mostly benefit the wealthy.)
Republicans were happy to spend $2.3 trillion on tax cuts that primarily benefitted the wealthy, but hate spending $1.9 trillion on lifting working people.
But I digress. As politicians rub their hands to divide up the loot, there was a point that probably should have been included in the Democrat-Gazette recitation of the money this morning.
In short: States can’t take the money for tax cuts.
A last-minute change in the $1.9 trillion economic relief package that President Biden signed into law this week includes a provision that could temporarily prevent states that receive government aid from turning around and cutting taxes.
The restriction, which was added by Senate Democrats, is intended to ensure that states use federal funds to keep their local economies humming and avoid drastic budget cuts and not simply use the money to subsidize tax cuts.
Republican politicians hate this. They claim this harms budget management — meaning it harms the burning desire to cut taxes. It is Republican orthodoxy that no disaster can’t be fixed by the elimination of the tax on capital gains and the estate tax, except maybe another cut in the top income tax rate imposed on millionaires. Cuz, see, it will trickle down. Unlike the stimulus money, which pours like a soothing waterfall on those who need it most.
Under the new law, $25 billion will be divided equally among states, while $169 billion will be allocated based on a state’s unemployment rate. States can use the money for pandemic-related costs, offsetting lost revenues to provide essential government services, and for water, sewer and broadband infrastructure projects.
But they are prohibited from depositing the money into pension funds — a key worry of Republicans in Congress — and cannot use funds to cut taxes by “legislation, regulation or administration” through 2024.
Democrats slipped the new language into the legislation last week after several senators from the party’s moderate wing expressed concern that some states would seize on the opportunity to use emergency relief money to subsidize tax cuts. They worked with Senator Chuck Schumer, the majority leader, on language for the amendment, according to a Democratic Senate aide.
The moderates, people like Sen. Joe Manchin, know about places like Arkansas.
You can see in Governor Hutchinson’s statement on the coming money a hint at a yearning to be able to do something with the money other than spending it on people. Arkansas has plenty of money because he’s been such a great manager, he says. He neglects to mention the previous stimulus money and the salubrious tax revenue effect of the billions pumped into Arkansas in coronavirus aid, enhanced unemployment benefits and forgivable loans to business. We did pay a cost for the governor resisting stricter health rules, but that was just lives, not a hit on the treasury.
If we have maximum flexibility, which I am requesting, then I will work with the General Assembly to set our priorities.. As I have said previously, we do not need these funds to balance our budget because we kept a balanced budget through reduced spending and fiscal constraint.
Can the legislature find a way to log-roll the money and justify another tax cut for Arkansas billionaires? Place your bets.
PS: The $4 billion in government aid will be outstripped by individual payments, as listed by the White House in the D-G article. The big pieces, though not all:
Child tax credits of up to $1,600 for each of 661,000 Arkansas children. That’s potentially another $1 billion
Earned income tax credits as high as nearly $1,000 for 184,000 Arkansas workers without children. That’s $184 million at the high end.
This is bad? Arkansas Republican Party spokesman Seth Mays called it “partisan virtue signaling.”
Can I have your share of the “virtue signal,” Seth? I don’t need the money but I’d be happy to pass it along to someone who does.